Ch09
11
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Transcript of Ch09
7/21/2019 Ch09
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CHAPTER 9COST ALLOCATION FOR JOINT PRODUCTS AND BY-PRODUCTS
SHORT ANSWER/PROBLEMS
1. Briefly dis!ss "#e f$!r deisi$%s "#&" '&%&(e'e%" '!s" '&)e $%er%i%( *$i%" +r$esses.
ANS,ER T#e f$!r deisi$%s "#&" '&%&(ers '!s" '&)e re(&rdi%( *$i%" +r$esses &re&s f$ll$s. T#ey '!s" "ry "$ de"er'i%e #&" *$i%" $s"s/ selli%( $s"s/ &%d se+&r&"e +r$essi%( $s"s &re e0+e"ed "$ $!r #e% er"&i% +r$d!"s &re '&%!f&"!red. Ne0"/'&%&(e'e%" '!s" deide $% "#e es" !se $f res$!res "#&" &re &2&il&le. 3&%&(ers '!s"%e0" l&ssify/ &s *$i%" +r$d!"s &%d4$r y-+r$d!"s4sr&+/ "#e $!"+!" $f +r$d!"i$%. T#el&s" deisi$% "#&" '!s" e '&de is #e"#er s$'e $r &ll $f "#e +r$d!"s ill e +r$essedf!r"#er $r s$ld &" s+li"-$ff. T#is deisi$% is '&de &sed $% "#e i%re'e%"&l $s"s "#&" $!ld e i%!rred "$ +r$ess f!r"#er &%d "#e i%re'e%"&l re2e%!e if +r$essed f!r"#er. J$i%" +r$d!"i$% $s"s &re irrele2&%" "$ "#is deisi$%.
3EDIU3
5. Briefly dis!ss "#e si0 s"e+s i% "#e &ll$&"i$% +r$ess.
ANS,ER T#e si0 s"e+s &re &s f$ll$s1. C#$$se "#e &sis $% #i# "$ &ll$&"e *$i%" $s".5. Lis" &ll 2&l!es "#&" $'+rise "#e &sis.6. Add !+ &ll "#e 2&l!es i% "#e lis" 785.:. De"er'i%e "#e +ere%"&(e $f "#e "$"&l e&# i"e' i% 85 is.;. 3!l"i+ly "#e +ere%"&(e y "#e $s" ei%( &ll$&"ed.<. F$r 2&l!&"i$% +!r+$ses/ di2ide "#e +r$r&"ed $s" y e=!i2&le%" !%i"s $f +r$d!"i$%.
3EDIU3
6. Dis!ss riefly "#e "#ree '$%e"&ry 'e&s!re'e%" "e#%i=!es $f *$i%" $s" &ll$&"i$%.
ANS,ER T#e s&les 2&l!e &" s+li"-$ff 'e"#$d &ssi(%s $s"s &sed $%ly $% "#eei(#"ed +r$+$r"i$%s $f "#e "$"&l s&les 2&l!es $f "#e *$i%" +r$d!"s i"#$!" $%sider&"i$%$f dis+$s&l $s"s &" "#e s+li"-$ff +$i%". T$ !se "#is 'e"#$d/ &ll +r$d!"s '!s" e s&l&le &""#e s+li"-$ff +$i%". T#e %e" re&li>&le 2&l!e 'e"#$d &ssi(%s $s"s &sed $% "#e +r$d!"?s +r$+$r"i$%&l %e" re&li>&le 2&l!e &" "#e s+li"-$ff +$i%". Ne" re&li>&le 2&l!e is e=!&l "$ +r$d!" s&les re2e%!e &" s+li"-$ff 'i%!s &%y $s"s %eess&ry "$ +re+&re &%d dis+$se $f "#e +r$d!".
A++r$0i'&"ed %e" re&li>&le 2&l!e &" s+li"-$ff 'e"#$d re=!ires "#&" & si'!l&"ed %e"re&li>&le 2&l!e &" s+li"-$ff e &l!l&"ed. T#is is e=!&l "$ fi%&l s&les +rie 'i%!si%re'e%"&l se+&r&"e $s"s. I%re'e%"&l se+&r&"e $s"s refer "$ &ll $s"s "#&" &re i%!rred e"ee% s+li"-$ff &%d "#e +$i%" $f s&le.
3EDIU3
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:. Briefly dis!ss "#e res"ri"i$%s &%d re=!ire'e%"s $% ser2ie $r(&%i>&"i$%s &%d %$"f$r- +r$fi"s "#&" rel&"e "$ *$i%" $s" &ll$&"i$%.
ANS,ER Ser2ie &%d %$"-f$r-+r$fi" $r(&%i>&"i$%s i%!r $s"s "#&" '&y e $%sidered *$i%" i% %&"!re/ s!# &s &d2er"isi%( &%d +ri%"i%( $f '!l"i+!r+$se d$!'e%"s. Ser2ie$r(&%i>&"i$%s &re %$" re=!ired "$ &ll$&"e "#ese $s"s "$ "#e i"e's $r)ed $%/ deli2ered/ $r &d2er"ised !" '&y #$$se "$ d$ s$ f$r & e""er '&"#i%( $f re2e%!es &%d e0+e%ses. N$"-f$r-+r$fi"s &re re=!ired y "#e AICPA "$ &ll$&"e "#ese $s"s &'$%( "#e &"i2i"ies $ff!%dr&isi%(/ &$'+lis#i%( &% $r(&%i>&"i$%&l +r$(r&'/ $r $%d!"i%( &% &d'i%is"r&"i2ef!%"i$%.
3EDIU3
;. Briefly dis!ss "#e %e" re&li>&le 2&l!e &" s+li"-$ff +$i%" 'e"#$d $f &ll$&"i%( *$i%" $s"s.
ANS,ER T#e %e" re&li>&le 2&l!e &" s+li"-$ff 'e"#$d &ssi(%s *$i%" $s"s &sed $%e&# +r$d!"?s +r$+$r"i$%&l NR@ &" "#e s+li"-$ff +$i%". NR@ is e=!&l "$ s&les +rie 'i%!s
$s"s "#&" &re %eess&ry "$ +re+&re &%d dis+$se $f "#e +r$d!". T$ !se "#is 'e"#$d/ &ll +r$d!"s '!s" e s&l&le &" "#e s+li"-$ff +$i%".
3EDIU3
<. ,#y is "#e %e" re&li>&le 2&l!e $f sr&+ !sed "$ l$er es"i'&"ed $2er#e&d $s"s i% se""i%( & +rede"er'i%ed $2er#e&d r&"e i% & *$ $rder $s"i%( si"!&"i$% i% #i# sr&+ is e0+e"ed $%'$s" *$s
ANS,ER T#e %e" re&li>&le 2&l!e $f sr&+ is !sed i% "#is &y e&!se "#e &'$!%"reei2ed fr$' "#e s&le $f sr&+ is $%sidered "$ e & red!"i$% $f "#e "$"&l $s" i%!rred i%
"#e +r$d!"i$% +r$ess. T#is +r$ess is si'il&r "$ "#e "re&"'e%" $f s&les 2&l!es $f &sse"s +!r#&sed &%d "#e% s$ld i% & &s)e" $f ($$ds. T#e es"i'&"ed $s" $f sr&+ is !sed i%se""i%( $2er#e&d r&"es "#eref$re/ #e% "#e sr&+ is s$ld "#e &'$!%" reei2ed s#$!ld e &red!"i$% $f "$"&l $2er#e&d.
3EDIU3
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Use "#e f$ll$i%( i%f$r'&"i$% f$r =!es"i$%s &%d .
BL C$'+&%y +r$d!es $%ly "$ +r$d!"s &%d i%!rs *$i%" +r$essi%( $s"s "#&" "$"&l G6/;.Pr$d!"s A& &%d Ii &re +r$d!ed i% "#e f$ll$i%( =!&%"i"ies d!ri%( e&# '$%"# :/; &%d</ (&ll$%s/ res+e"i2ely. BL &ls$ r!%s $%e &d e&# '$%"# "#&" &d2er"ises $"# +r$d!"s &" &$s" $f G1/;. T#e selli%( +rie +er (&ll$% f$r "#e "$ +r$d!"s &re G5 &%d G1.;/ res+e"i2ely.
. ,#&" &'$!%" $f *$i%" +r$essi%( $s"s is &ll$&"ed "$ e&# +r$d!" &sed $% (&ll$%s
+r$d!ed
ANS,ERA :/;41/; G6/; G1/<I </41/; G6/; G5/1:6
EASY
. ,#&" &'$!%" $f &d2er"isi%( $s" is &ll$&"ed "$ e&# +r$d!" &sed $% s&les 2&l!e
ANS,ERA :/; G5. G 9/4G19;/ G1/; G<95I </ G1.; 1;/4G19;/ G1/; G
G19;/
3EDIU3
Use "#e f$ll$i%( i%f$r'&"i$% f$r =!es"i$%s 9 &%d 1.
KAB C$'+&%y +r$d!es "#ree +r$d!"s fr$' "#e s&'e +r$ess &%d i%!rs *$i%" +r$essi%( $s"s
$f G6/.
Dis+$s&l S&les +rie $s" +er F!r"#er Fi%&l s&les
+er (&ll$% (&ll$% &" +r$essi%( +rie +er K&ll$%s &" s+li"-$ff s+li"-$ff $s"s (&ll$%3&" 5/6 G :.; G1.5; G1. G . N&" 1/1 <. 6. 5. 1.&" ; 1. . 5. 1;.
Dis+$s&l $s"s f$r "#e +r$d!"s if "#ey &re +r$essed f!r"#er &re
3&"/ G6. N&"/ G;.; &"/ G1..
9. ,#&" &'$!%" $f *$i%" +r$essi%( $s" is &ll$&"ed "$ "#e "#ree +r$d!"s !si%( s&les 2&l!e &"s+li"-$ff
ANS,ER3 5/6 G :.; G1/6;4G51/9; G6/ G1/:1; N 1/1 G <. G </< G51/9; G6/ G95
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; G1. G ;/4G51/9; G6/ G<6G51/9;
3EDIU3
1. ,#&" &'$!%" $f *$i%" +r$essi%( $s" is &ll$&"ed "$ "#e "#ree +r$d!"s !si%( %e" re&li>&le2&l!e &" s+li"-$ff
ANS,ER S&les +rie 'i%!s dis+$s&l $s"M G:.; G1.5; G6.5; G<. G6. 6. G1. G. 5.
3 5/6 G 6.5;M G /:; 4G11/; G6/ G1/9: N 1/1 G 6.M G 6/6 4G11/; G6/ G :1 ; G 5.M G 1/ 4G11/; G6/ G 5;; G11/;
3EDIU3
11. A $'+&%y +r$d!es "$ '&i% +r$d!"s *$i%"ly/ A &%d B/ &%d C/ #i# is & y-+r$d!" $fB. A &%d B &re +r$d!ed f$r' "#e s&'e r& '&"eri&l. C is '&%!f&"!red fr$' "#e resid!e $f "#e +r$ess re&"i%( B.
C$s"s ef$re se+&r&"i$% &re &++$r"i$%ed e"ee% "#e "$ '&i% +r$d!"s y "#e %e"
re&li>&le 2&l!e 'e"#$d. T#e %e" re2e%!e re&li>ed fr$' "#e s&le $f C is ded!"ed fr$' "#e$s" $f B. D&"& f$r A+ril ere &s f$ll$s
C$s"s ef$re se+&r&"i$% G 5/C$s"s &f"er se+&r&"i$%
A ;/B 65/C :/
Pr$d!"i$% f$r A+ril/ i% +$!%dsA /B 5/C 5/
S&les f$r A+rilA <:/ +$!%ds G.:6;B 1/ +$!%ds .<;C 5/ +$!%ds .6
Required: De"er'i%e "#e (r$ss +r$fi" f$r A+ril.
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ANS,ER
NR@ CRE@ENUE 5/ .6 G</COST 7:/
NR@ G5/
NR@A 7/ G.:6; G6;/ G;/ G6/B 75/ G.<; G16/ 7G65/ G5/ 1/
G:/
ALLOCATIONA 7G6/4G:/ G5/ G1;/B 7G1/4G:/ G5/ ;/
UNIT COSTA 7G1;/ G;/4/ G .5;
B 7G;/ G6/45/ G .:
KROSS PROFITA 7G .:6; G.5; <:/ G15/B 7G .<; G.: 1/ :;/
G1<;/ DIFFICULT
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15. T#e "$"&l *$i%" $s" $f +r$d!i%( 5/ +$!%ds $f Pr$d!" A 1/ +$!%ds $f Pr$d!" B&%d 1/ +$!%ds $f Pr$d!" C is G/;. Selli%( +rie +er +$!%d $f "#e "#ree +r$d!"s&re G1; f$r Pr$d!" A G1 f$r Pr$d!" B &%d G; f$r Pr$d!" C. J$i%" $s" is &ll$&"ed!si%( "#e s&les 2&l!e 'e"#$d.
Required:
&. C$'+!"e "#e !%i" $s" $f Pr$d!" A if &ll "#ree +r$d!"s &re '&i% +r$d!"s.
. C$'+!"e "#e !%i" $s" $f Pr$d!" A if Pr$d!"s A &%d B &re '&i% +r$d!"s &%dPr$d!" C is & y-+r$d!" f$r #i# "#e $s" red!"i$% 'e"#$d is !sed.
ANS,ER
&. SALES @ALUE UNIT COST
A 5/ G1; G6/4G:;/ G/; G;/45/ G5.;
B 1/ 0 G1 G1/4G:;/ 0 G/; G1/<<41/ G1.<
C 1/ 0 G; G ;/4G:;/ 0 G/; G 6641/ G .6G:;/ G/;
. TO ALLOCATE G/; G;/ G5/;
SALES @ALUE UNIT COST
A 5/ G1; G6/4G:/ G5/; G1/;45/ G.96;
B 1/ G1 G1/4G:/ G5/; G <5;41/ G.<5;G:/ G5/;
EASY
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16. A 3&%!f&"!ri%( C$'+&%y '&)es "#ree +r$d!"s A &%d B &re $%sidered '&i% +r$d!"s&%d C & y-+r$d!".
Pr$d!"i$% &%d s&les f$r "#e ye&r ere
55/ ls. $f Pr$d!" A/ s&l&le &" G<.1/ ls. $f Pr$d!" B/ s&l&le &" G6.
;/ ls. $f Pr$d!" C/ s&l&le &" G.9
Pr$d!"i$% $s"s f$r "#e ye&r
J$i%" $s"s G5</<C$s"s &f"er se+&r&"i$%
Pr$d!" A 65/Pr$d!" B 19/Pr$d!" C </9
Required: Usi%( "#e y-+r$d!" re2e%!e &s & $s" red!"i$% &%d %e" re&li>&le 2&l!e'e"#$d $f &ssi(%i%( *$i%" $s"s/ $'+!"e !%i" $s"s 7& if C is & y-+r$d!" $f "#e +r$ess&%d 7 if C is & y-+r$d!" $f B.
ANS,ER
&. JOINT COST G5</< NR@ C 76/1 7;/ G.9 G</9TO ALLOCATE G56/;
SALES @ALUE COST AFTER SEPARATION NR@55/ G< G1/65/ G65/ G1//
1/ G6 G ;:/ G19/ 6;/G1/6;/
ALLOCATIONG1//4G1/6;/ G56/; G1</<<G 6;/4G1/6;/ G56/; <1/66
G56/;
UNIT COSTA 7G1</<< G65/455/ G5.5<B 7G<1/66 G19/41/ G1.:
. NR@A G1// G1//4G1/6/1 G5</< G199/5<;B G6;/ G61 6/14G1/6/1 G5</< G /66;
G1/6/1
UNIT COSTA 7G199/5<; G65/455/ G5.6<B 7G/66; G1;1/941/ G1.5
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3EDIU31:. S'i"# C$. +r$esses r& '&"eri&l i% De+&r"'e%" 1 fr$' #i# $'e "$ '&i% +r$d!"s/ A&%d B/ &%d & y-+r$d!"/ C. A is f!r"#er +r$essed i% De+&r"'e%" 5/ B i% De+&r"'e%" 6/ &%d C i%De+&r"'e%" :. T#e 2&l!e $f "#e y-+r$d!" red!es "#e $s" $f "#e '&i% +r$d!"s/ &%d s&les 2&l!eis !sed "$ &ll$&"e *$i%" $s"s.
De+" 1 De+" 5 De+" 6 De+" :C$s" I%!rred G9/ G1/ G/ G1/Pr$d!"i$%
A 1/ ls.B 5/ ls.C 1/ ls.
Selli%( PrieA G14l.B G;4l.
C G54l.
Required:
&. C$'+!"e !%i" $s"s f$r A &%d B.
. E%di%( i%2e%"$ry $%sis"s $f ;/ ls. $f B &%d 1/ ls. $f C.,#&" is "#e 2&l!e $f "#e i%2e%"$ry
. Re$'+!"e & &%d &ll$&"i%( $s" &sed $% %e" re&li>&le 2&l!e.ANS,ER
&. JOINT COST G9/ SALES @ALUE 75/ 71/ G5
G/
SALES @ALUEA 1/ G1 G1/4G5/ G/ G6;/
B 5/ G ; 1/4G5/ G/ G6;/G5/
UNIT COSTA 7G6;/ G1/41/ G:.;B 7G6;/ G/45/ G5.1;
. ENDINK IN@ENTORYB ;/ G5.1; G1/;C 1/ G5. 5/
G15/;
. NR@
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A G1/ G1/ G 9/4G15/ G/ G6:/<1;B G1/ G/ 95/4G15/ G/ 6;/6;
G15/ G/
UNIT COSTA 7G6:/<1; G1/41/ G:.:<B 7G6;/6; G/45/ G5.1
ENDINK IN@ENTORYB ;/ G5.1 G1/;C 1/ G5. 5/
G15/;
3EDIU31;. T#ree ide%"ifi&le +r$d!" li%es/ Pr$d!"s A/ B/ &%d C/ &re $"&i%ed i% fi0ed =!&%"i"iesfr$' & &si +r$essi%( $+er&"i$%. T#e $s" $f "#e &si $+er&"i$% is G65/ f$r & yield $f;/ "$%s $f Pr$d!" A 5/ "$%s $f Pr$d!" B &%d 1/ "$%s $f Pr$d!" C. T#e &si
+r$essi%( $s" is &ll$&"ed "$ "#e +r$d!" li%es i% +r$+$r"i$% "$ "#e rel&"i2e ei(#" +r$d!ed.
Bel"&y Pr$d!"s C$'+&%y d$es $"# "#e &si +r$essi%( $r) &%d "#e f!r"#errefi%e'e%" $f "#e "#ree +r$d!" li%es. Af"er "#e &si $+er&"i$%/ "#e +r$d!"s &% e s$ld&" "#e f$ll$i%( +ries +er 'e"ri "$%
Pr$d!" AQG<
Pr$d!" BQG;6
Pr$d!" CQG6;
C$s"s "$ refi%e e&# $f "#e "#ree +r$d!" li%es f$ll$
Pr$d!" Li%esA B C
@&ri&le $s" +er 'e"ri "$% G G G:T$"&l fi0ed $s" G5/ G1</ G</
T#e fi0ed $s" $f "#e refi%i%( $+er&"i$% ill %$" e i%!rred if "#e +r$d!" li%e is %$"refi%ed.
T#e refi%ed +r$d!"s &% e s$ld &" "#e f$ll$i%( +ries +er 'e"ri "$%
Pr$d!" AQG;
Pr$d!" BQG<;
Pr$d!" CQG:
Required:
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&. De"er'i%e "#e "$"&l !%i" $s" $f e&# +r$d!" li%e i% & refi%ed s"&"e. . ,#i# $f "#e "#ree +r$d!" li%es/ if &%y/ s#$!ld e refi%ed &%d #i# s#$!ld e s$ld
&f"er "#e &si +r$essi%( $+er&"i$% S#$ $'+!"&"i$%s.ANS,ER
,T ALLOCATION&. A ;/ ;/4/ G65/ G5/
B 5/ 5/4/ G65/ /C 1/ 1/4/ G65/ :/
/ G65/
UNIT COSTA 7G5/ G5/4;/ G G;5B 7G/ G1</45/ G G;;C 7G: G</41/ G: G;
. CHANKE IN RE@ENUE CHANKE IN COST CHANKE IN PROFIT
A G;G< G1; 7G5/4;/ G G6B G<;G;6 G15 7G1</45/ G G6C G:G6; G; 7G</41/ G: G;
T#eref$re/ +r$ess $%ly Pr$d!" A.
3EDIU3 1<. T#e S"$%e C$'+&%y +r$d!ed "#ree *$i%" +r$d!"s &" & *$i%" $s" $f G1/. T#ese +r$d!"s ere +r$essed f!r"#er &%d s$ld &s f$ll$s
Pr$d!" S&les Addi"i$%&l Pr$essi%( C$s"s
A G5:;/ G5/B 66/ 6/C 1;/ 1/
T#e $'+&%y #&s #&d &% $++$r"!%i"y "$ sell &" s+li"-$ff dire"ly "$ $"#er +r$ess$rs. If"#&" &l"er%&"i2e #&d ee% sele"ed/ s&les $!ld #&2e ee% A/ G;</ B/ G5/ &%d C/G;</.
T#e $'+&%y e0+e"s "$ $+er&"e &" "#e s&'e le2el $f +r$d!"i$% &%d s&les i% "#ef$r"#$'i%( ye&r.
Required: C$%sider &ll "#e &2&il&le i%f$r'&"i$% &%d &ss!'e "#&" &ll $s"s i%!rred &f"ers+li"-$ff &re 2&ri&le.
&. C$!ld "#e $'+&%y i%re&se %e" i%$'e y &l"eri%( i"s +r$essi%( deisi$%s If s$/#&" $!ld e "#e e0+e"ed $2er&ll %e" i%$'e
. ,#i# +r$d!"s s#$!ld e +r$essed f!r"#er &%d #i# s#$!ld e s$ld &" s+li"-$ff
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ANS,ER
&. C!rre%"ly NI is S&les G;/Addi"i$%&l Pr$essi%( C$s"s 7</
G1;/ JC 71/
G ;/
NI &% e i%re&sed y G11/ if A is %$" +r$essed.
A B C
. ∆ S&les G19/ G65/ G119/
∆ C$s" 75/ 76/ 71/
NI47LOSS G711/ G 5/ G 19/
EASY
